The management of interest rate risk during the crisis: evidence from Italian banks

Lucia Esposito (), Andrea Nobili and Tiziano Ropele
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Lucia Esposito: Bank of Italy

No 933, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: Changes in interest rates constitute a major source of risk for banks� business activity and can diversely affect their financial conditions and performance. We use a unique dataset to analyse Italian banks� exposure to interest rate risk during the crisis, relying on the standardized duration gap approach proposed by the Basel Committee. We provide evidence that banks managed their overall interest rate risk exposure by means of on-balance-sheet restructuring complemented by hedging with financial derivatives. But the complementary relationship between risk-management decisions differs significantly across banks. The different impact of a future increase in interest rates on banks� economic value will be a matter of concern for policymakers when they return to a less accommodative monetary policy stance.

Keywords: interest rate risk; derivatives; hedging; financial crisis (search for similar items in EconPapers)
JEL-codes: E43 G21 (search for similar items in EconPapers)
Date: 2013-09
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac and nep-rmg
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Citations: View citations in EconPapers (7)

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Journal Article: The management of interest rate risk during the crisis: Evidence from Italian banks (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_933_13

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